| ASHEVILLE, N.C., June 11
ASHEVILLE, N.C., June 11 A federal judge on
Wednesday said he would consider dismissing a U.S. Department of
Justice lawsuit accusing Bank of America Corp of civil
fraud in the sale of mortgage securities that soured during the
global financial crisis.
While not issuing a formal ruling, U.S. District Judge Max
Cogburn said he had concerns and indicated at a hearing in
Asheville, North Carolina that he might adopt the recommendation
of a federal magistrate judge for a dismissal of the fraud
claims tied to the $850 million sale of securities.
"DOJ may not have the evidence to try this as a fraud case,"
Cogburn's skepticism comes at a crucial time, as the
second-largest U.S. bank negotiates with the Justice Department
and other federal and state authorities to potentially pay more
than $12 billion to resolve a range of probes into its sale of
mortgage securities that quickly imploded.
Cogburn also told assistant U.S. Attorney Daniel Ryan that
the government needed to provide more substantial information to
support its case.
While the case from the U.S. Attorney's office in Charlotte
is not a major factor in Bank of America's negotiations, it has
added further pressure on the bank as it seeks to put a range of
mortgage-related liabilities stemming from the financial crisis
In announcing the lawsuit, Attorney General Eric Holder had
said it reflected the Justice Department's ongoing efforts to
"hold accountable those who engage in fraudulent or
In March, U.S. Magistrate Judge David Cayer recommended
dismissal of the lawsuit, saying that the case did not fit the
statutes the government relied on in bringing it.
Civil prosecutors in Charlotte had charged Bank of America
under a civil fraud law, FIRREA, which requires it to reference
criminal statutes that it believes are implicated.
The lawsuit references two criminal laws, including one that
bars false statements to government agencies and is often used
to prosecute people accused of covering up a crime.
It also referred to another law which Cayer said only
applied to traditional customer-related bank activities such as
loans, and not securities.
On Wednesday, Cogburn said he would consider allowing the
Justice Department to amend its complaint.
Cogburn also considered a related lawsuit the U.S.
Securities and Exchange Commission brought against Bank of
America, which Cayer had recommended should proceed.
At the hearing Cogburn said he had not yet made a final
decision but was inclined to uphold Cayer's recommendation on
the SEC lawsuit. He also said the SEC case could help make
investors whole even if the Justice Department's case was
(Writing by Aruna Viswanatha in Washington; Editing by Caren
Bohan and Lisa Shumaker)